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World Series is only the wind-up to more profit, Texas Rangers say

After the Washington Senators moved to Texas nearly 40 years ago, a young accountant named Bob Simpson helped handle the team's taxes.

Fast-forward to the present.

Simpson, now a natural gas tycoon, closed a $35 billion deal this summer to sell XTO Energy Inc. to Exxon Mobil Corp. Six weeks later, Simpson and a group of partners bought the Texas Rangers out of bankruptcy for $593 million.

Shortly after that, the team was launching its most successful postseason run ever, culminating in the franchise's first World Series appearance.

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That run added $12 million to $14 million to the club's bottom line. Buoyed by on-field success and a lucrative new television contract, the Rangers' franchise value could rise $50 million to $100 million beyond the purchase price - if the team sustains its success.

"Winning is a huge enhancement," said Simpson, a Rangers fan since 1972.

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But sports analysts caution that it will take a sound business plan to turn the team into a perennial contender.

"They have got to avoid irrational exuberance," said Marc Ganis, president of Sportscorp Ltd., a sports business consulting firm in Chicago.

Suffice it to say, the deep postseason run gives the new ownership group a big head start.

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Fresh from the World Series appearance, Chuck Greenberg, the team's managing partner and chief executive, said he aims to make the Rangers "one of the most dynamic franchises in Major League Baseball."

Analysts agree that the Rangers have a big opportunity to boost revenue and become a stronger financial player in the baseball world.

"They can move up significantly within the baseball rankings of the clubs in the strongest economic position," Ganis said. "But if their management miscalculates and tries to become the next New York Yankees, they will likely plunge this team into an economic abyss again, just like Hicks did when he signed A-Rod."

That's a reference to former owner Tom Hicks, the Dallas financier who signed star slugger Alex Rodriguez to a $252 million, 10-year contract a decade ago. Rodriguez was traded to the Yankees after the 2003 season, and the Rangers still owed him nearly $25 million in deferred pay when the club filed for bankruptcy earlier this year.

In addition to Simpson and Greenberg, the new ownership group includes Nolan Ryan, the Rangers president and Hall of Fame pitcher; Dallas energy billionaire Ray Davis; and a host of investment bankers, hedge fund managers and even country singer Charley Pride.

Davis and Simpson put in more than half of the $593 million that the ownership group paid for the Rangers, Simpson said.

Improving stats

Their contribution was "substantially equity," he added. That makes for a sharp contrast to the debt-financed deals Hicks was famous for and which eventually forced him to sell the team.

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The franchise's annual interest payments have fallen about 90 percent, Simpson said.

There's also a new television deal with Fox Sports that begins in 2015. It's been reported to be worth $1.6 billion over 20 years, which would average out to about $80 million a year.

"Between the increase in revenues, decreased interest expense, long-term TV contract, all of those working together should give us the firepower financially to be competitive every year," Simpson said.

Neither Simpson nor Greenberg would disclose the team's revenue or other financial information. According to Rangers financial documents posted on the website Deadspin.com earlier this year, the team lost nearly $12 million in 2009 on sales of more than $167 million.

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Sales revenue this year was almost certainly higher because of the team's success on the diamond, said Andrew Zimbalist, a well-regarded sports economist at Smith College in Northampton, Mass. He estimated the increase at $12 million to $14 million.

The excitement of the World Series appearance could help boost sales next year by $15 million or more in season ticket sales, corporate sponsorships, signs and other goodies, Zimbalist said.

"If they play their cards right, particularly given the new television contract, it will mean a much higher revenue future," he said. "It's going to be a very different economic experience for the new owners than it was for Tom Hicks."

Zimbalist cited the new TV contract as a major driver in boosting the franchise value by a "conservative range" of $50 million to $100 million.

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The Rangers are also bound to have higher expenses, especially player salaries. After all, they had one of the smallest payrolls in Major League Baseball this year at about $55 million.

They're also planning to spend money on Rangers Ballpark in Arlington, including a video screen and other technological upgrades that could cost up to $20 million. And they've already enrolled front-office personnel in MLB's pension system.

At the same time, they're working to boost revenue. If they can sell more tickets, higher attendance would mean more concessions, merchandise and parking revenue.

Spotting potential

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"Our season ticket base is one of the smallest in the major leagues - it's only about 8,000," Greenberg said. "We averaged 31,000 in attendance. What that means is that 23,000 fans a game are here without being season ticket holders. Most teams at a high level have season ticket bases at more than 20,000."

Greenberg said he is also aiming to forge better relationships with fans and sponsors. "One of the great attractions that kept us going all throughout the very arduous process of seeking to buy the team was that we felt there was tremendous growth potential and a unique opportunity for our revenues to grow on the backs of on-field success and taking care of people," he said.

Time will tell whether it works - and whether the new owners' business approach leads to continued success when it comes both to baseball and money.

"While the Rangers may see a short-term spike in revenue next year, it will be up to the team to ensure that this increased short-term interest is converted into long-term customer bases," said David Carter, executive director of the University of Southern California's Sports Business Institute.

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"The Rangers have to demonstrate that their winning, when coupled with great customer service to both fans and sponsors, is likely to continue," he said. RANGERS' OWNERSHIP LINEUP

Board of directors

•Ray Davis, co-chairman

•Bob R. Simpson, co-chairman

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•Robert E. Beaudine

•Brent W. Clum

•Chuck Greenberg

•Kenneth A. Hersh

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•Keith Hutton

•Robert A. Innamorati

•William E. Kassling

•Neil Leibman

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•Nolan Ryan

•David Simpson

•Ted C. Skokos

•Dave Wood

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Ownership of Texas Rangers Baseball Express LLC

•All American Pastime LLC: Ray Davis

•BOW Investors LLC: William E. Kassling, Bill Allen, Robert J. Brooks, Holman Harvey, Tom Lauria, Nickolas Vande Steeg

•Hardball Express LLC: Bob R. and Janice Simpson, Keith A. Hutton, David Simpson

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•Rangers Baseball Partners LLC: Ted C. Skokos, Robert E. Hernreich, Donald J. Shepard

•Texas Sports Acquisition Group LLC: Neil Leibman, Andy Bursten, John Havens, Glenn Picquet, Jim Waller

•Brent W. Clum

•Thomas F. "Toby" Darden

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•Chuck Greenberg

•Kenneth A. Hersh

•Robert A. Innamorati

•Allan B. Polunsky

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•Charley Pride

•Billy Quinn

•Nolan Ryan

•Jim L. Turner

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•Vaughn O. Vennerberg II

•Dave Wood

•James R. Young